A confession: I am not convinced about mobile payments.
It’s not that I am a Luddite. The obvious convenience and benefits of being able to pay for the stuff of life directly from the device typically strapped to my hip is enough for me. However, having spent decades in the IT industry has made me less than trusting when it comes to new technology. I am a version 1.1 guy. With mobile payments though, I may be a version 10.10 guy.
Two Sticking Points
I worry about mobile payments for two reasons. First, security.
There are enough problems with credit card and store card payment systems being hacked (cough Target cough cough), but mobile devices add a new twist to paying for things. Not only do you have to worry about the target company getting hacked, you also have to worry about the device itself being compromised by viruses and other computer plagues.
The companies are new as well. Visa, MasterCard and American Express have had decades to figure out how to secure payments and manage financial services. New companies such as Amazon, Apple and many other vendors are relative newcomers to the payment processing space.
The second worry revolves around all the data that these companies collect. Unlike a credit card, a mobile phone knows where you are, what other companies you do business with, and lots of other information about you. Most stores either deal with aggregate data or very limited information such as what you bought last Tuesday. Given the amount and type of data a company can collect on individuals, it’s scary to think how much we have to rely on corporate responsibility when making mobile purchases.
The only company that I’ve trusted to engage in mobile payments with has been Starbucks. Starbucks, which espouses corporate responsibility and social justice, seemed like a good pilot for paying by smartphone. Besides its reputation, which diminished the corporate creepiness factor to a manageable level, I admit to going to Starbucks a fair amount (but not too much). My activity was enough to see how its mobile payment system worked, while keeping my financial exposure small.
The overall experience of using my smartphone for paying for lattes and Frappuccinos was superior. No need to pull out my wallet, just flash my phone. I could tell how many times I went to Starbucks (and how much money I paid for it) and won rewards for my purchases.
Unfortunately, when it came to the biggest issue of mobile payments -- security -- Starbucks flubbed the experience entirely. My account was hacked, not once but twice, and either purchases were made against my credit card or my Starbucks account was drained of preloaded money. This not only caused me time on the phone with Starbucks and my credit card company but shattered my confidence that it could manage a simple set of cappuccino transactions.
It has also made me doubt if any of these new companies is ready for mobile payments. No one has any real experience with mobile payments and some of these companies have no history in financial services at all.
What would it take for mobile payments to go mainstream? In a word, confidence. Whether it’s Apple or Starbucks, confidence will come from the following:
- Better security in the app and in the backend. Even after my user and password was changed, my transaction history was still available in the app and, for a short while, the cache held information about my account. The app is clearly not that secure. That and the fact that my account was hacked twice shows how far Starbucks needs to go in shoring up its security.
- Fraud protection. Starbucks was very good about restoring the money into my account that had been stolen from it. However, when someone loaded the account from my credit card to order hundreds of dollars of items from the Starbucks website, I had to rely on my credit card fraud protection to deny the purchases. Starbucks was willing to return the money that was originally stolen, but not the subsequent fraudulent transactions.
- 24 hour customer service. You get a notice saying that someone has changed your account, effectively hijacking it. Immediately, you call Starbucks and … are told to wait until it's open. Sorry, this is money, not a bag of coffee that should have been here yesterday and hasn’t yet. Without 24x7 service, customers will have to sweat it out until they can get through to customer service.
- Transparency. Confidence comes from knowing the good and the bad. Unfortunately, most companies aren’t nearly transparent enough. Technology companies especially are used to being secretive in order to protect their intellectual property and business processes. That’s a surefire confidence killer when it comes to financial transactions.
- Open privacy and data policies. Nothing will make customers run for the hills more than the thought that they are being tracked like animals with a radio collar. Mobile payments companies need to adopt and abide by policies that protect consumer data and privacy.
Mobile payments have a future. The convenience and the experience are better than pulling a card out of your wallet. The ability to get rewards for purchases, especially at stores you frequent, is alluring. That future may be far off though if new mobile payment companies continue to have missteps that erode consumer confidence.